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Intermarket:
Risk appetite remains buoyant into today’s European session after the Dow jumped 464 points to a record closing high on Wednesday. Treasury yields little changed although the 10-year slightly higher. US dollar mixed, slightly weaker going into today. Oil and gold both higher.
Traders still focusing on yields, with recent stabilization seen as supportive for stocks. Strategists now looking for value outperformance (and higher yields) as economic reopening gains further traction. Pro-cyclical rotation in play.
House of Representatives passed the $1.9T stimulus package, with President Biden scheduled to address the US at 8 PM ET today.
Today’s main focus will be the ECB decision: consensus is for Lagarde to formally signal an increase in pace of its emergency bond buying program. If ECB expands QE and strikes a dovish tone due to slow vaccine rollouts in Europe and longer path to recovery, expect EUR weakness. If the ECB instead chooses to dismiss the current situation, traders would be surprised and EUR could strengthen.
Matters that Matter:
• Biden’s coronavirus bill wins approval in House
• Biden to address the nation at 8.02 pm ET today
• ECB may signal faster money printing to combat yield rise
• Australia to support tourism with $928 mln COVID-19 stimulus package
• US Sec of State Blinken, National Advisor Sullivan to meet China’s Foreign Minister Wang and Foreign Policy official Yang on March 18 in Alaska
• New Zealand Feb REINZ House Sales Y/Y +14.6% form +3.2%
Majors 1-Day View:
USDJPY
- After posting 10 consecutive higher daily highs & lows, sellers returned to the market from close to 110.00, prices marginally interrupting the trend of higher daily lows on Wednesday. However, buyers returned to the market, prices rallying ½ Big Fig in Asia trade. As such, the call is to buy on dips towards 108.40 today.
- JPY pairs bounce with yields, GBPJPY strongest.
- Offers & large barrier options reported at 110.00
- AUDJPY second best after GBPJPY.
EURUSD
• Prices interrupted the trend of lower daily highs on Wednesday, with signals improving marginally. However, ahead of key event risk today, technicals lose some significance. Key resistance is 1.1950, key support 1.1830.
• Even as IMM Net-Spec positioning remains long, Eur under pressure as yields drive inflows into USD.
• Support at 1.1830s holding for now, resistance 1.1950
• ECB Decision today main event.
AUDUSD
• Buyers returned to the market on Tuesday, with prices posting a higher daily high & low on Wednesday. As such, signals are improving and remain marginally bullish into today.
• AUD higher on risk-on sentiment.
• Resistance at .7800, support at .7670.
GBPUSD
• Prices interrupted the trend of lower daily highs on Tuesday and posted a high daily high & low on Wednesday. As such, signals are improving and remain marginally bullish into today.
• Pound still buoyant into Thursday.
• Resistance 1.4000, support 1.3860
FX Relative ATR Grid
Comment: Volatility declined across the board on Wednesday, with volatility contraction evident especially in JPY, GBP, CAD. This would suggest a volatility expansion is to be expected, but in the meantime being more selective and cautious is the main message.
Relative Strength Grid
Comment: The strongest trends are in USD (bullish), CAD (bullish), CHF (bearish), GBP (bullish), JPY (bearish). The strongest momentum was seen yesterday in JPY (bearish), CHF (bearish).